Ruling may make imbibing costlier
By Juan Perez Jr.
WORLD-HERALD STAFF WRITER
A Lancaster County judge has overturned the state's policy of 
taxing flavored malt beverages as beer instead of distilled spirits.
The ruling is the latest word in an ongoing battle sparked by three groups that sued the Nebraska Liquor Control Commission.
District Judge John A. Colborn's decision, issued this week, could dramatically raise prices on the alcoholic drinks. State taxes on spirits are about 12 times higher than those on beer. The beverages' alcohol levels are similar to beer.
Critics have long maintained that the beverages,such as Mike's Hard Lemonade and Smirnoff Ice, are marketed to underage drinkers.
Higher prices might discourage their purchase by underage drinkers, they say, adding that higher taxes on such sales could generate about $2 million in state tax revenue per year.
"We're pleased with the court's decision, and we see today as a day of justice for our youth," said Diane Riibe, executive director of Project Extra Mile, one of the groups that filed suit.
"For far too long, the (alcohol) industry has received a tax break on these products under the veil of an illegal rule adopted by the commission years back. Today that wrong has been made right."
Vince Powers, attorney for the plaintiffs, said the liquor commission violated a state law that requires a product to be classified as a distilled spirit if it contains any alcohol wrought by the distilling process.
The liquor commission, meanwhile, has argued that state law still allows treating the beverages like beer.
Flavored malt beverages, dubbed "alcopops" by some critics, are brewed like beers, though most of the beer taste and color and some alcohol are stripped away.
Flavors produced through a distilling process are added to replace some of the brewed alcohol.
These beverages "do contain a fermented beer base and could, arguably, fit within the definition of beer under (state law)," Colborn wrote.
However, he added, state law says that "any beverage which contains alcohol obtained by distillation, mixed with water or other substance in solution'' is a spirit.
Hobert Rupe, executive director of the liquor commission, declined to comment on the ruling and referred questions to the Attorney General's Office.
"We'll have to wait to hear what the next step is," Rupe said.
Commission Chairman Bob Logsdon said of the ruling: "It's going to cause some activity, let me put it that way."
He declined to elaborate.
Colborn acknowledged that his decision may not be the last word.
"The court recognizes that the question of how to classify (flavored alcoholic beverages) is a question wrought with many public policy concerns and is one best left to the Legislature," Colborn wrote.
"As the law currently stands, though, (flavored alcoholic beverages) are clearly spirits ... and must be taxed as such."
Contact the writer:
444-1068, johnny.perez@owh.com
State Appealing Judge's "Alcopops" Decision
Nebraska Attorney General Jon Bruning's office filed notice Tuesday that it will appeal the judge's ruling.
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